As a front-runner in several areas of the COVER Insight research report last month, Legal & General knows the importance of initiating sales through consumer awareness, writes Bonnie Burns.
This year's COVER Insight research gives us a valuable snapshot of the protection industry and how advisers rate providers in terms of their products and service. Such industry research is vital if we are to continue to grow the market and improve year on year. Most advisers would agree that protection insurance of any sort tends to be a push rather than a pull sale - that is, customers do not ask for insurance unless prompted, but need to be made aware of the potential impact of not being insured.
The task for Legal & General and other providers is to make that sale as easy as possible for the adviser. This would be with affordable products that satisfy the customer need, with marketing material that can be used to communicate the key benefits, with technology that can make the application process more efficient and service that exceeds expectations.
Legal & General is the UK's leading protection provider and we have been named life insurer of the year at the British Insurance Awards eight times in the past 10 years. We are proud to be in this position but the COVER Insight research shows that the industry as a whole can improve. Respondents only rated the industry positively in just three of six key aspects - price, product and technology. However, underwriting, marketing and customer service received negative scores.
This is worrying because it means that product providers could be doing a lot better in important areas. It is therefore up to us as market leader to tackle these issues.
Insight is the key word from this research and it is valuable to building and maintaining a business. The core product functions of life insurance and critical illness (CI) cover have not changed for years, but along the way, we have recognised the need for fine-tuning, such as extra illnesses under CI cover. Underwriting and service are never perfect, but by listening to feedback we can make valuable improvements.
Staying competitive
Competitive pricing gets you noticed and may drive sales in the short term, but if you cannot back that up with quality underwriting and service, then business is not going to keep coming through the front door. The market is so competitive now that premiums for level term assurance have been dropping for the past five years or more and barely a week goes by without one provider or another re-pricing.
The reason price is such a dominant factor is because consumers' only real interaction with an insurance provider, claims notwithstanding, is at point of sale. If you have just arranged a mortgage for someone and they accept the need for protection cover, then the thought at the front of their mind is going to be "how much will this cost me?" Keeping those monthly premiums to a minimum is vital.
We therefore keep non-essential benefits to a minimum and focus on core value. Insurance is complicated enough without adding extra features that people do not understand and are never going to use.
Technology is a tool that protection providers can use to make the application process slicker and more efficient. Our online processing system can give underwriting decisions instantly, helping you to get your clients on risk quickly. IFA firm, LifeSearch, regularly publishes a report on turnaround times for life insurance applications and Legal & General recently came out top with an average of 16 days, compared with 40 days for some other providers.
COVER Insight shows that almost two-thirds of advisers submit applications online, via providers' websites or through portals. This leaves a substantial chunk that still use paper applications. This is probably because of internet access issues, but also because some people prefer having something in front of them. While we expect this proportion to decline over the years, we recognise that choice is important in the way that people want to do business with us.
Technology costs a lot of money and, let's face it, providers would not invest large sums in technology if there was no cost benefit. Of course, online processing saves us money, but this means we can pass on this saving to the consumer in the form of lower premiums. We plan to enhance our online application technology in the spring of next year, which will streamline the application process even further and enable more products to be offered online. Throughout the development process we have been seeking feedback from advisers to ensure that it remains easy to use.
Ups and downs
Underwriting is an area where advisers gave the industry a marginally negative score in the COVER Insight research, but Legal & General's score remains positive. The research also indicated that, if price and product features were assumed to be equal, underwriting is the key driver for recommending a particular provider. Quality of underwriting is so important because it means that the customer gets the right product at the right price and because the risks to the provider are properly assessed. Get this wrong and you will quickly gain a bad reputation.
Legal & General invests heavily in its underwriting department to offer a better service. Several years ago we established an underwriting academy in conjunction with Cardiff University to offer underwriters and claims handlers a basic grounding in medical conditions to allow them to assess the risk of an application and the validity of a claim. More recently, we took that a step further and developed a customised course for senior underwriters to allow them to specialise in one of eight in-depth modules such as cardiology and oncology. Having such a depth of knowledge improves our underwriting function to such an extent that it is a key reason why staff in this area want to join us.
Not all customers and their applications are straightforward, so the underwriting process can sometimes be complex. This can cause delays, which is frustrating. Some 13% of advisers in the COVER Insight research said that better communication during the underwriting process would improve the industry. We agree, which is why earlier this year we launched an extranet detailing our underwriting and claims processes. We also offer a telephone helpdesk and advice line for advisers to discuss applications with underwriters pre-submission. We believe that underwriting should be transparent and as pain-free as possible.
Looking at marketing and communications, most people seem to prefer a targeted approach. The research shows that the overwhelming preference for advisers to receive information is by email (62%) and the next best is by traditional mail (19%). It is important that advisers know immediately of changes that are relevant to them, and there is nothing more immediate than email.
Communicating marketing messages is a little like having a balanced diet - everything in moderation. Therefore, we like to balance out email with face-to-face meetings at road shows and events, and literature that can be used for advisers and customers. Product literature can also be a handy sales tool that advisers can use when sitting down with customers because, along with key products features, it helps explain the need for protection. Indeed, almost two-thirds (64%) of respondents to the COVER Insight survey said that they use company literature as sales material.
Service is an element that touches all parts of the application and claims process. We believe that for the most part, we are getting it right - according to COVER Insight, we have been identified as top for service. But this is only ever a snapshot in time, and service standards are difficult to build up but easy to destroy.
Delivering the goods
Reputation for paying claims is vitally important and all providers have a duty to reduce the proportion of declined claims. Over the past year, we have managed to reduce declined claims by 19% and we hope to build on that next year. COVER Insight shows that after underwriting, the key deciders between products that are similar in features and price, are customer service and claims experience.
The protection market, and in particular the IFA sector, is so competitive that it is essential for us to keep our finger on the pulse. That is why research such as the COVER Insight report is so important. With more improvements in products, price, technology and underwriting to come next year, we hope to continue to set the benchmark in protection. n
Bonnie Burns is product marketing director at Legal & General
